The first dimension of an effective local governance system (or an effectively organized local public sector) is that functions and powers are assigned to different government levels (or administrative tiers) in a way that maximizes the overall performance of the public sector. In other words, in an effective local governance system, local governments are assigned meaningful responsibility and authority to manage local affairs.
An important concept that is used to assess the appropriateness of a country’s territorial-administrative structure and its functional assignments is the subsidiarity principle. The subsidiarity principle states that public goods and services should be provided by the lowest level of government that can do so efficiently. Adherence to the subsidiarity principle is a widely accepted benchmark of good local governance systems in the literature on decentralization and localization. This principle balances the arguments and concerns made both by proponents of centralized service delivery as well as by the champions of decentralizations: the subsidiarity principle suggests we should not automatically assign functions to either the highest or the lowest government level or administrative tier, but rather, urges us to identify the government level closest to the people that is able to perform the function efficiently.
At the surface, it is not excessively difficult to compare the subnational government structure and the assignment of functions and expenditure responsibilities in different countries. The legal framework in most countries defines an organogram that reveals the number of subnational government levels or tiers in each country, as well as the functional responsibilities of jurisdictions at each level or tier.
In practice, however, meaningful and effective functional assignments require local governments or other local bodies not only to have the legal “responsibility” to perform a function, but also to have the necessary authority and financial resources (from own source revenues as well as intergovernmental grants) to perform their functions well. Measuring and assessing the actual or “de facto” assignment of functional responsibilities is thus much more complicated that simply engaging in a review of the relevant legislation.
Consistent with the “second generation theory” of intergovernmental relations, it is also important to consider the vertical assignment of functions and expenditure responsibilities in a political economy context that recognizes that central and local political decision-makers do not necessarily try to maximize the well-being of their constituents. Instead, the assignment of functions and responsibilities is often shaped by the personal and institutional motivations of political and institutional decision-makers. As a result, in some countries there is a gap between the legal (de jure) responsibilities of local governments or local officials, and their de facto role in local service delivery.
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